The US dollar is under pressure, and the expectation of the Federal Reserve cutting interest rates is strengthening

Recently, the weak trend of the US dollar is mainly influenced by the following factors:

1. Expectations of Fed interest rate cuts heating up: The market expects the Fed to cut interest rates by at least 77 basis points within 2025, and the path of interest rate cuts may be more aggressive than expected.

2. The yield of US Treasuries fell back: As the market became more worried about the slowdown of the US economy, the yield of treasury bond bonds fell further, weakening the attractiveness of the US dollar.

3. The initial jobless claims data in the United States is improving, but non farm payroll data remains to be observed: The Department of Labor (DOL) announced on Thursday that the number of initial jobless claims for the week ending March 1 fell to 221000 (previously 242000), lower than market expectations of 235000.

Market expects moderate growth in non farm employment:

It is expected to create 160000 new job opportunities in February (143000 in January). The unemployment rate is expected to remain at 4.0%.

If the non farm payroll data is lower than expected, it may accelerate the pace of interest rate cuts by the Federal Reserve, further suppressing the US dollar. "- Kieran Williams, Head of Foreign Exchange Strategy at InTouch Capital Markets

European Central Bank cuts interest rates for fifth consecutive time, Lagarde warns of economic growth risks

On Thursday, the European Central Bank (ECB) announced a 25 basis point reduction in the deposit facility rate to 2.5% (the fifth consecutive rate cut). The main refinancing rate has been lowered by 25 basis points to 2.65%, in line with market expectations.

European Central Bank President Lagarde stated that the interest rate cut is to support economic stability, but she also warned that the risk of economic growth in the eurozone still leans towards a "downward trend". In addition, she emphasized that "the uncertainty of US trade policy may exacerbate the economic slowdown

Although the market expects more interest rate cuts to reduce financing costs, inflationary pressures still exist, especially with the recent rebound in inflation indicators in the United States and the European Union, which may limit the space for central banks to further relax.

Trade policy impact: US Mexico Canada tariff dispute temporarily postponed, but market uncertainty still exists

Trump announced on Thursday that tariff exemptions on Canadian and Mexican goods would be extended until April 2nd, causing Canada to postpone its second round of retaliatory tariffs on American products.

If the US reintroduces tariffs on April 2nd, it may trigger market risk aversion and boost the trend of the euro against the US dollar.

In the short term, the adjustment of tariff policies temporarily alleviates market concerns, but there is still significant uncertainty in the long-term development of trade tensions.

Editor's viewpoint:

The euro against the US dollar remains at a high level, mainly supported by European Central Bank policies, German fiscal stimulus, and the weakness of the US dollar. The future trend will depend on the following key factors:

1. Non farm payroll data in the United States: If the data falls short of expectations, it may strengthen the market's bet on the Federal Reserve cutting interest rates, further suppressing the US dollar.

2. Federal Reserve policy statement: If Federal Reserve officials release clearer dovish signals, the US dollar may continue to decline.

3. Uncertainty in trade policy: If the United States reintroduces tariffs on Mexico and Canada on April 2nd, it may boost demand for the euro as a safe haven asset.

Overall, there is still room for the euro to rise against the US dollar in the short term, while the US dollar is facing multiple pressures including expectations of interest rate cuts, a decline in US bond yields, and uncertainty in trade policies.